BCH/BTC Trade Update: Part2

Since recommending putting on the $ neutral short BTC/ long BCH futures play at 0.018 last week, the ratio has moved to 0.025 & the trade has returned 38% (it was up 50% in the 24hrs immediately after the trade idea was published). 38% is a little too fast for what I had in mind but the directional move is warranted and I still target 0.1 for year end with a stop at 0.0150. Maybe look to enter/add at 0.0225 on any pull backs.

One major concern is that on a $ neutral basis the trade has not been performing as expected as the BCH and BTC price moves have been very divergent depending on the general market direction (i.e. correlation has been very volatile). On down moves, BTC has been coming off less and conversely, on up moves BCH has been out performing. This means of course that the trade idea suggestion of a delta/market neutral $ strategy is not causing a perfect hedge or hedge ratio. As such, if you have this trade on or are thinking about putting it on there are a few things you can do/think about:

  • If you are overall bullish the market then a $ neutral strategy works
  • If you are overall bearish the market, then hold slightly less of a long BCH in $ terms against your short BTC position
  • Keep a $ neutral position AND hold a long BTC put option or long BCH put option position as a hedge. The actual amount of options you want to buy against this is an art not a science and so could be very complex to manage as a hedging strategy. Gamma hedging this portfolio is going to be finger in the air stuff!
  • the perpetual futures funding play has also been very lucrative on CoinFLEX with the BTC short perp swap leg typically collecting 15–20% annualised with the BCH long swap perp leg paying 6–8%. Thus you collect 10–12% APY in funding as well.

Whichever route you take you have to actively check in on the trade performance and adjust accordingly according to any historical action or back testing that you witness from a p&l perspective.

This is not investment advice, DYOR.

Cofounder, CoinFLEX. All opinions my own.